Sydney, Australia – A new report suggests that the Australian Securities and Investments Commission (ASIC) raised concerns about the local Australian subsidiary of crypto exchange FTX as far back as eight months before the company’s collapse in November 2022.
ASIC’s Initial Concerns Over FTX Australia
According to documents obtained by Guardian Australia, ASIC was worried about the way that FTX Australia was operating after it was able to obtain a license in the country through a company takeover. FTX acquired its Australian financial services license (AFSL) by acquiring financial institution IFS Markets in December 2021, and started its operations a few months later in March 2022. This allowed FTX Australia to sidestep the normal level of scrutiny applied to new AFSL licensees, said ASIC Chairman Joe Longo.
ASIC Issues Notice to FTX
The regulator issued a Section 912C notice to FTX the same month it began operating, requiring the crypto exchange to provide information about its operations for ASIC to assess if it met AFSL license conditions. This notice allows ASIC to direct the licensee to provide documents that specify the financial services it provides and the financial services business it carries out to determine if the licensee satisfies the “fit and proper person test.”
ASIC Monitoring FTX’s Operations
A briefing document obtained by Guardian Australia also confirmed that ASIC put the exchange under “surveillance activity” and issued three notices to FTX between its initial concerns and the company’s collapse on November 11, 2022. The document schedule shows that the regulator was still concerned about FTX’s operations as late as October 2022.
FTX Australia’s Financial License Suspended
FTX Australia was one of more than 130 FTX-linked companies that ceased operations after the parent company FTX went into bankruptcy proceedings on November 11, 2022. The Australian subsidiary of FTX had its financial license suspended on November 16 and has gone into voluntary administration, which is similar to Chapter 11 bankruptcy in the United States. An estimated 30,000 Australian customers and 132 companies are owed money or crypto from the exchange.
Cointelegraph reached out to ASIC for a comment but did not receive a response before publication.
In conclusion, the new report highlights the red flags raised by ASIC eight months before the collapse of FTX, which shows the regulator’s efforts to monitor the operations of the crypto exchange and ensure that it complies with AFSL license conditions. The collapse of FTX Australia has affected thousands of customers and companies, and it remains to be seen what the outcome will be for those affected.
